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Thursday 8 October 2015

Auto Insurance for Teen Drivers

Because they present more of a risk, auto insurance rates are generally higher for teenage drivers. However, there are some ways you can both protect yourself financially and lower the cost of insuring your teen by doing the following:

Understand the Risk

It is important to talk to your teen about the relationship between auto accidents and insurance costs. Teens often forget that the cost of owning a car includes auto insurance. Explain that a driving infraction or being in an accident can drive up their insurance costs.

Shop Around

Insurance companies differ in how they price policies for young drivers, so spend some time researching prices to find the best fit for you and your teen.

Insure Your Teen on Your Own Policy

It is generally less expensive for parents to add teenager to their insurance policy than for teens to purchase their own. By insuring your teenager’s car with your insurance company, you can also qualify for a multi-vehicle discount.

Assign Your Teen to the Right Car

Find out how your insurer assigns drivers to cars—some insurers will assign the driver who is the most expensive to insure (generally the teenager) to the car that is the most expensive to insure. If possible, assign your teen to the least valuable car. Some insurers will allow policyholders to do this if the number of automobiles equals or exceeds the number of insured drivers on a policy. With this kind of arrangement there can be no exceptions; your teen must use only the car to which he or she is assigned, even in an emergency. If your teen is involved in an accident with an unassigned car, penalties could be imposed and your premiums might increase.

Increase Your Liability Insurance

Should your teen get into an accident, state minimums for liability insurance will not be enough to fully protect you from lawsuits. Many vehicles today are worth more than $15,000 and medical bills for injuries can easily exceed $20,000 for one person. If your teen is found negligent in an accident and the damages exceed your insurance limits, you will be held financially responsible and could be sued in court for those amounts not covered by your insurance.

Consider an Umbrella Liability Policy

In our litigious society, you may want to have an extra layer of liability protection. That is what a personal umbrella liability policy provides. An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It will also cover you for things such as libel and slander. For about $150 to $300 per year you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that. Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.

Raise Your Deductible

Going from a $250 to $500 or $1,000 deductible can save you 10 percent to 20 percent on your premium. You may want to use those savings to increase your liability insurance.

Is Your Teen Going Away To School?

When your teen heads off to college, you may be eligible for lower premiums, providing he or she leaves the car behind. Many insurers will reduce rates for students attending a school at least 100 miles away from home who do not have a car on campus.

Good Grades + Driver Training = Discount

Most insurance companies will give discount on auto insurance to students who are maintaining at least a “B” average in school. Another way to earn a discount is by having your teen take a recognized driver training course.

Contact Your Insurance Professional

When your teen is ready to get his or her learners permit, make sure to have a conversation with your insurance professional so he or she can clearly explain the costs involved in insuring a teenage driver. The good news is, as your teenager gets older, insurance rates will drop—providing he or she has a good driving record.

Road Rage

Increasingly crowded highways and traffic backups cause many drivers to lose control and become extremely aggressive. Aggressive driving is a real problem that can lead to serious accidents on the road.

Road rage can also cause problems for your claim process if you should happen to be involved in an auto accident. Road rage is a listed as an exemption in many auto insurance policies since any damage stemming from aggressive isn’t truly an accident but rather caused by risky behavior .

If you encounter aggressive drivers, do not challenge them, and stay as far away as possible. You may want to take down the license plate number and report their behavior to police so they won’t hurt themselves or someone else. If you happen to suffer from anger management problems while driving yourself, here are some tips to help you cool off.

Try not to run late.
When you're in a hurry, your patience is short and you are much more likely to become aggravated. Try to give yourself a few extra minutes to get where you need to go.
Other drivers are not evil.
Sometimes, people make mistakes, or they might be driving more slowly for a reason. Do not assume that they are driving slowly just to annoy you.
Try not to look.
The most tempting thing when you're passing someone who is annoying you is to shoot them a dirty look. Do not do it! Doing so could trigger the other driver into more aggressive action.
No gestures, either.
Other than a wave to someone who lets you into your lane, do not use your hands (or any specific combinations of fingers) to communicate with other drivers.
Tailgating is bad.
Just because someone is driving slow does not mean you should hang out on their back bumper. If they had to stop short and you rear-ended them, the accident would be your fault.
Someone tailgating you is worse.
If someone is tailgating you, do not aggravate yourself and the other driver by playing cat and mouse with your speed. Move out of the way and let them pass you.
Do not honk your horn insistently.
It might make you feel better, but it is really kind of silly. And when everyone does it in a traffic jam, it's really annoying and increases everyone’s stress level.
Do not be a hero.
If the other driver is being rude and starts to follow you, do not engage with him or her. Do not try to stop and confront the other driver, just keep you doors locked, give yourself room at intersections to drive away, and head to the nearest police station.

Sources of information:

http://www.progressive.com/shop/teen-driving-road-rage.aspx

http://banktime.com/auto/road-rage-and-your-car-insurance/1272/

Winter Driving

Safe Driving and Vehicle Maintenance Are Key

4 Ways Your Driving Habits Could Wreck Your Credit Score

Winter is a time when safe driving and well-maintained vehicles take on even greater importance. “Failure to keep in proper lane or running off the road” and “driving too fast for conditions” are the two of the most frequent driver behaviors, according to the National Highway Traffic Safety Administration (NHTSA).

In order to avoid potentially dangerous situations, the I.I.I. offers the following winter driving tips:

Give yourself enough time to arrive at your destination. Trips can take longer during winter than other times of the year, especially if you encounter storm conditions or icy roads.
Bring a cellphone so that those awaiting your arrival can get in touch with you, or you can notify them, if you are running late. But avoid the temptation of using the phone while driving, as it can be a dangerous distraction—pull over first.
Drive slowly because accelerating, stopping and turning all take longer on snow-covered roads.
Leave more distance than usual between your vehicle and the one just ahead of you, giving yourself at least 10 seconds to come to a complete stop. Cars and motorcycles usually need at least 3 seconds to halt completely even when traveling on dry pavement.
Be careful when driving over bridges, as well as roadways rarely exposed to sunlight—they are often icy when other areas are not.
Avoid sudden stops and quick direction changes.
Be sure to keep your gas tank full. Stormy weather or traffic delays may force you to change routes or turn back. A fuller gas tank also averts the potential freezing of your car's gas-line.
Keep windshield and windows clear. Drivers in cold-weather states should have a snow brush or scraper in their vehicle at all times. Your car's defroster can be supplemented by wiping the windows with a clean cloth to improve visibility.
Do not activate your cruise control when driving on a slippery surface.
Do not warm up a vehicle in an enclosed area, such as a garage.
Keep your tires properly inflated and remember that good tread on your tires is essential to safe winter driving.
Check your exhaust pipe to make sure it is clear. A blocked pipe could cause a leakage of carbon monoxide gas into your car when the engine is running.
Monitor the weather conditions at your destination before beginning your trip. If conditions look as though they are going to be too hazardous, just stay home.

My daughter recently turned 15, and one of the first things she did on her birthday was to take an online test required to get her learner's permit. She passed, and now she's driving. I don't have to lecture her on safe driving habits; she's been doing that to me for years. And she's more up to speed on the rules of the road than I am.

But what I do have to explain is how driving may affect her credit in the future. They don't teach that in Driver's Ed, and it's something most of us don't think about until it affects us.

Here are four ways that driving can have significant, long-term impact on your credit.

1. Tickets and Fines

If you get a ticket for a traffic or parking violation, it shouldn't show up on your credit reports. But if you don't pay the fines that result, the balance may be turned over to acollection agency, and that collection account may very well show up on your credit reports. Collection accounts, regardless of the reason or the amount, can be score killers.

Generally, collection accounts remain on credit reports for up to seven and a half years, even if they have been paid. But there may be special provisions in place that will allow for these accounts to be removed when the debt is paid. For example, in Washington, D.C., the Department of Motor Vehicles reports that the collections agency it hires "has agreed to automatically send an account delete record to the credit bureaus that it utilizes. This means that the record of your delinquent debt should disappear from credit bureau records within two to four weeks after payment in full is made."

If you have unpaid tickets, check your free credit reports to see if they appear on your reports as collection accounts. Then check with your state's department of motor vehicles to find out if they will be removed from your credit reports if you pay what's owed. Even if that is not the case, you'll want to resolve those accounts so the amount due doesn't continue to grow. In some jurisdictions, failing to pay these debts can even cause your license to be suspended.

2. Car Payments

An auto loan can help or hurt your credit, depending on how you manage it. One of the factors that most credit scoring models look at is your "mix of credit." In many scoring models, it makes up about 10 percent of your score. You'll score better for this factor if you have a variety of types of credit accounts; for example, if your report lists both revolving accounts (such as credit cards) and installment accounts (such as vehicle or student loans). If you want to see how your account mix is affecting your credit, check yourfree Credit Report Card, which will grade you on each of the five major credit reporting factors.

In addition, if you co-sign a car loan for your child (or anyone else for that matter), their loan will likely appear on your credit reports and will be treated as your own. Even if payments are made on time, the debt can affect your credit scores.

Miss a payment, however, and your credit scores may plummet. Recent late payments can lower your credit scores significantly and are especially problematic if you want to finance another vehicle or refinance your current loan since payment history on current and previous auto loans is an important factor in the scoring models used to evaluate auto loan applications.

In the worst-case scenario, where you fall behind on payments and your vehicle is repossessed, that repo will stay on your credit reports for seven years. Plus, the lender may try to collect a deficiency (the difference between what you owed and what they sold the vehicle for), and even file a lawsuit for that amount. If they win, you'll have a judgment on your credit reports as well.

3. DUIs

If you are charged with driving under the influence of alcohol or drugs, the DUI will not appear on standard credit reports. But the costs of a DUI -- even for first-time offenders -- are staggering, and often cost $5,000 or more. Trying to come up with the money for attorney's fees, court costs, bail, towing, higher insurance premiums, etc., can put a strain on your budget and cause you to fall behind on other bills.

Or you may find yourself having to max out your credit cardsor get a loan to pay those costs, resulting in higher balances on your credit reports. Those higher credit card balances can hurt your credit scores.

4. Accidents

There were some 10.8 million motor vehicle accidents in 2009, according to the U.S. Census Bureau. These accidents don't just wreck vehicles; they sometimes destroy people's credit as well. Accidents may involve property damage that may not be covered by insurance, or large medical bills that aren't covered in full.

Even with adequate insurance, it can take time for insurance companies to sort out who pays for what, and to pay policyholders or providers. In the meantime, it's not unusual for medical bills to go unpaid. If medical providers aren't paid quickly enough, they may turn those bills over to collections; again, damaging credit reports.

Has driving impacted your credit? Share your experience in the comments below.

That Will Help Others.

Safety Tips for Teen Drivers

Ways to Save When Your Teen Starts Driving:

We hit a milestone in my house this year. My oldest child turned 16 and, in theory, can get behind the wheel of a car and start driving solo.

I'm not sure I'm ready for that and, fortunately, she's not either, so she still has her learner's permit. However, I've been searching high and low for ways to keep my auto insurance rates reasonable once she joins the ranks of independent drivers. Here are tips picked up along the way:

The first years teenagers spend as drivers are very risky. Motor vehicle crashes are the leading cause of death among 15- to 20-year-olds and research shows that more than half of teens who die in crashes are passengers, most of whom are not wearing a seatbelt.

Immaturity and lack of driving experience are the two main factors leading to the high crash rates among teens. Even the best teenage drivers do not have the judgment that comes from experience. It affects their recognition of, and response to, hazardous situations and results in dangerous practices such as speeding and tailgating. Teens also tend to engage in risky behavior—eating, talking on their cellphones, text messaging, talking to friends in the car—and they often do not wear their seatbelts.

While getting a drivers license is an exciting rite-of-passage for teens, it can make a parent frantic. The Insurance Information Institute recommends parents take the following steps to ensure the safety of their teen.

Pick a Safe Car

You and your teenager should choose a car that is easy to drive and would offer protection in the event of a crash. Avoid small cars and those with high performance images that might encourage speed and recklessness. Trucks and sport utility vehicles (SUVs) should also be avoided, since they are more prone to rollovers.

Enroll Your Teen in a Drivers Education Course

The more driving practice the better; experience will give your teen confidence behind the wheel, and he or she will be better able to react to challenging situations on the road.

Furthermore, a teenager who has learned to drive through a recognized drivers education course is viewed more favorably by insurers and may earn a discount. In some states, teens must take a drivers education course if they want to get a license at age 16; otherwise, they have to wait until they are 18.

Enroll Your Teen in a Safe Driver Program

Check whether your insurance company offers a “safe driver” program. Teen participants in these programs sign parent-teen driving contracts that outline the young driver’s responsibilities (for instance, not having teen passengers in the car, being home by a certain hour, etc) and the consequences of failure to meet those expectations. Check whether your insurance company has such a program—if your teenager completes the program, you may be eligible for a discount.

In addition, insurance companies are helping to reduce the number of accidents involving teen drivers by subsidizing the cost of electronic devices, such as GPS systems and video cameras, which can monitor the way teens drive and alert parents of unsafe driving practices by email, text message or phone.

Discuss the Dangers of Drug and Alcohol Use

Advise teens never to drink or do drugs, and not to get in a car if the driver has used drugs or alcohol. Encourage your teen to call you if such a situation arises to ensure they have a safe way home.

Understand the Dangers of Distracted and Impaired Driving

Talk to your teen about the importance of never phoning or texting while driving, and keeping distractions, such as the radio and chatting with friends to a minimum. Teens should also be responsible passengers when in their friends’ cars. New drivers should wait 1,000 miles or six months before picking up their first teen passenger.

Be a Good Role Model

New drivers learn by example, so if you drive recklessly, your teenage driver may imitate you. Always wear your seatbelt and never drink and drive.

Enroll Your Teen in a Graduated Drivers License Program—or Create Your Own

Many states have been successful in reducing teen accidents by enacting graduated drivers license (GDL) legislation. These laws, which include a three-phase program, allow teen drivers to develop more mature driving attitudes and gain experience behind the wheel. New drivers are restricted from certain activities, such as late-night driving or having passengers in the car, until they have had their licenses for a set period. A number of states also restrict the amount of time new drivers may be on the road without supervision. For more information on GDLs, visit www.iihs.org.

Parents should take an active role in their teenagers’ driving practice and expose them to driving in a wide variety of driving conditions to build experience and confidence. If your state does not have a GDL program, you can institute the same policies with your own children. Introduce privileges gradually. Allow independent driving only after continued practice, including night driving and driving in inclement weather.

Keep in mind, teens do not all reach the appropriate level of maturity to handle a drivers license at the same time. Parents should consider whether teens are easily distracted, nervous or risk takers before allowing them to get a license or even a learners permit.

1. Invest in a Good Driver's Training Program

According to the Insurance Institute for Highway Safety, teen drivers are risky drivers. It could be reckless behavior or it could be inexperience, but the fatal crash rate per mile for 16-19-year-olds is three times that of drivers age 20 and older. That means insurance companies are automatically going to see your teen as a claims risk and raise your rates. If your child starts racking up tickets or gets in a fender bender or two, watch your rates head to the stratosphere.

You may be able to keep your premiums lower by helping your teen avoid risky behavior behind the wheel, and that means getting them into the best driver's education program possible. I selected my daughter's school here in Michigan, in part, because it was able to demonstrate statistically that its graduates ended up in accidents at a rate far below the statewide average for all teen drivers.

2. Embrace Your State's Graduated driver Licensing Program

All 50 states have enacted graduated driver licensing programs that gradually ease teens into independent driving. Typically, the programs require 30-50 hours of supervised drive time before a restricted license is issued, until a teen's 18th birthday. The IIHS says graduated licensing programs are associated with fewer teen fatalities and fewer insurance claims. But the programs can work only if you enforce them at home. Don't fudge numbers on the drive-time log, and don't turn a blind eye when your teen blatantly violates the restrictions on their license.

Sure, it can be a pain to spend 50 white-knuckled hours in the car with your teen while they are learning, but hopefully your reward will be lower insurance premiums and a child who makes it to adulthood.

3. Avoid Letting Your Teen Have Their Car ...

It can be tempting to buy your teen a vehicle. Then they won't be constantly borrowing yours and potentially making a mess of it. I advise you resist the temptation for these reasons:

Having them drive your car would make them a secondary driver rather than a primary one, a designation that could keep your premiums lower.
Having them share the family vehicle may limit their drive time, which could be a good thing for young drivers who are prone to getting in accidents.
Buying another car means you'll be paying insurance on another car. Need I say more?

4. ... Or Make Sure Theirs Is Cheap(er) to Insure

But maybe you're in a situation in which you really need your teen to have a separate vehicle. I can imagine this would be especially true if your household only has one vehicle currently. In that case, be smart about the type of car you get your teen. Some vehicles are safer and, in turn, cheaper to insure. The IIHS has recommendations as to what it considers the best cars for teens.

5. Add Your Teen to Your Policy

Assuming you will be paying the premiums, it is almost always the better deal to add your teen to your policy rather than purchase a separate one. The insurance company takes into account the driving record of each person listed on a policy. Your good driving should partially offset your teen's potentially risky driving. Plus, your account may come with discounts not available on a teen's policy.

6. Look for Teen Driver Discounts

When you add your teen, ask the insurance company about discounts for new drivers. Students with good grades may be eligible for discounts; those who take an approved safety course may also be eligible. If your teen goes away for school and doesn't take the car, you may be able to get a discount for that, too.

7. Let the Insurance Company Spy on Your Teen

Usage-based insurance is one of the latest fads in the world of automobile insurance. Auto insurance companies send you a device that you plug into a port under your dashboard. It records how fast you drive, how fast you accelerate and how fast you brake, among other things. Then, if the auto insurance gods say you've been a good driver, you're rewarded with a discount on your premium.

These discounts are available to all drivers, but parents might find they are useful for monitoring their teens. Some companies issue reports grading driving skills, and some teens might be inclined to lay off their lead foot if they know someone, somewhere is watching. If you like the idea of monitoring your teen but aren't thrilled with the idea of letting an insurer inside your dashboard, you could also try spying yourself.

8. Consider a Higher Deductible or Lower Coverage

One surefire way to reduce your premiums is to raise your deductible. Just make sure you have enough in the bank to cover it if needed. Similarly, you could see how much it saves to drop collision or comprehensive coverage. However, do the math before making any rash decisions. Unless you can afford a new car, dropping comprehensive coverage could mean you'll be without a set of wheels if your vehicle gets totaled.

9. Shop Around for Better Rates

I was shocked to find out the insurance company, to which I had been so faithful for 17 years, was charging me double what other insurers were quoting. Perhaps it's different for other companies, but my experience was that loyalty doesn't necessarily pay off in terms of cheaper premiums.

Before you blindly add your teen to your existing policy, shop around for better rates. Underwriting policies vary by company, and some may have better pricing for young drivers. In addition, teen discount programs can differ between insurers.

10. Consolidate Your Coverage With One Insurer

Finally, when you find the right car insurance company, consider moving all your policies to that provider. Virtually all insurance companies offer multipolicy discounts, and the more you insure, the greater your discount may be.

Do you have a teen driver in the house? Tell us how you keep your insurance costs down by leaving a comment below or on our Facebook page. Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash.

What should I do if I am having trouble settling my claim?

Tips On How To Settle Insurance Claim:

If you are not satisfied with how your claim is being handled, there are steps you can take.

Let your agent or company representative know that you are unhappy.
If the agant or representative is unable to solve your problem, get the name and phone number of the head of the insurer's claims department. Your insurance company may also have a consumer complaint department that can help.
Be prepared to support your case.
Send documents and a letter explaining why you are not satisfied and make sure you have the figures to back up your argument. Be certain to include your address, claim number, day and evening phone numbers and any other important identifying information.
Review your auto insurance policy.
Most companies offer either arbitration or appraisal services to help settle differences and disputes. Your insurance policy will explain these options.
Contact your state insurance department.
Explain the reasons for the disagreement to a consumer services representative at the department.
Contact an arbitrator to hear your case.
An independent arbitrator with experience in insurance matters can decide if the settlement you were offered is fair. Your insurance company may suggest an arbitrator or you can get your own from theAmerican Arbitration Association at 212-484-4000.
Consult an attorney.
As a last resort, consult an attorney who specializes in auto insurance. Each state’s bar association offers a free legal referral service, which will give you names of qualified candidates. Attorneys work either on an hourly rate or on a contingency basis, depending on the type of case. Get the attorney's fee structure in writing. You can remain current on the progress of your claim by requesting that you receive copies from your attorney of all correspondence. Your attorney must have your agreement before committing to any settlement.

After your claim has been settled, take time to re-evaluate your auto insurance coverage to make sure you have adequate protection to cover you against any future damage or liability claims.

What are my rights when filing a claim?

Know Your Basic Rights To File A Claim For Your Insurance:

As a policyholder, you have certain rights. Every state has laws protecting consumers. Your policy is a legal contract between you and your insurer. It defines your rights and obligations as well as the rights and obligations of the insurance company.

If you have any questions regarding your rights under the policy, talk to your insurance agent or company representative. You may also contact your state insurance department, state attorney general's office, or your state's consumer affairs department.

If I file a claim, will my premium go up?

The Insurance Premium Fact:

You may be reluctant to file a claim because you fear that your premium will go up or your insurance will be canceled. Practices vary from company to company. In general, an insurer will increase your premium by specific percentages for each chargeable claim made against your policy above a specific dollar amount. A chargeable claim is one the insurer considers primarily your fault. The percentages and ceilings vary from company to company. These increases generally stay on your premium for three years following the claim.

Your company may also decide not to renew your policy if your driving record gets markedly worse or you have several accidents. Different insurers have different rules about what constitutes an unacceptably bad driving record. But some accidents, such as those caused by drunk driving, will probably trigger a nonrenewal from virtually every insurance company.

If you have an accident but don‘t report it to your insurer, you are taking a risk, even if the damage seems minor. If the other driver sues you weeks or months later, your failure to report the accident might cause your insurer to refuse to honor the policy. And even if they do honor the policy, the delay will certainly make it harder for the insurer to gather evidence to represent you.

Understanding Your Insurance Deductible

Understanding the role deductibles play when insuring a car or a home is an important part of getting the most out of your insurance policy.

A deductible is basically the amount “deducted” from an insured loss. Deductibles have been an essential part of the insurance contract for many years and represent a sharing of the risk between the insurance company and the policyholder. When repairing your home or replacing personal possessions, the amount of the deductible would come out of your own pocket.

A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. Generally speaking, the larger the deductible, the less a consumer pays in premiums for an insurance policy. Deductible amounts can be found on the declarations (or front) page of standard homeowners and auto insurance policies.

Here is how it works: if you have a $500 “dollar deductible,” that $500 would be deducted from your claim. So, if your insurance company has determined that you have an insured loss worth $10,000 you would receive a claims check for $9,500.

Percentage deductibles are calculated differently. They are based on a percentage of the home’s insured value. So if your house is insured for $100,000 and your insurance policy has a 2 percent deductible, $2,000 would be deducted from the amount you are reimbursed on a claim. In the event of the $10,000 insurance loss, you would be paid $8,000.

Deductibles in many parts of the country have been going up. In hurricane prone states, where there is a greater risk of a major catastrophe, special deductibles may apply for homeowners insurance claims when the cause of damage is attributable to a hurricane. These deductibles are generally higher and may take the form of a percentage of the policy limits.

Deductibles for property damage work differently than, for example, a typical health insurance policy where there a single annual deductible for the policy. With an auto or homeowners insurance policy, the deductible applies each time you file a claim. The one major exception to this is in Florida, where hurricane deductibles specifically are applied per season rather than for each storm.

Hurricane deductibles have helped to make more private insurance coverage available in coastal communities at a lower price. This means more choice for consumers. So, consumers who reside in states where competitive markets exist can often shop around for coverage and usually find that they have a selection of insurance policies to pick from that offer a variety of different premiums, coverages and deductibles.

Here are some other important things to know about deductibles:

Raising Your Deductible Can Save Money

One of the best ways to save money on a homeowners or auto insurance policy is to raise the deductible. For example, for auto insurance, increasing the dollar deductible from $200 to $500 can reduce collision and comprehensive coverage premium costs by 15 to 30 percent. Going to a $1,000 deductible can save you 40 percent or more. But, remember that if you have a loss, this amount will be deducted from your insurance claim and that you will be responsible for the difference.

Deductibles Differ by Company and by State

Insurance is state regulated. And insurance companies must follow strict state laws. This also applies to the way deductibles are incorporated into the language of a policy, and how they are implemented. In many states a range of deductibles can be found. So if you are shopping for insurance, you should always ask about deductibles when comparing policies. For homeowners or renters insurance policies, most insurers offer a minimum $500 dollar deductible. However, raising the deductible to $1,000 or more can save upwards of 20 percent on the cost of an insurance policy.

Deductibles Do Not Apply to Liability Claims

There are generally no deductibles for the liability portion of a homeowners or auto insurance policy. Instead, the deductibles apply to property damage. So, on in an auto policy, there is a deductible for the optional comprehensive or collision coverage, but not for the liability portion. And, in a homeowners policy, deductibles apply to damage to the structure of the house or personal possessions but not if a homeowner is sued or a medical claim is made by someone injured in the home.

Flood Insurance Offers a Range of Deductibles

Flooding is not covered by standard homeowners insurance policies but is available from the National Flood Insurance Program (NFIP) and from some private insurance companies. The NFIP offers separate policies for the structure of your home and for your personal possessions, along with a variety of deductibles. You can choose one deductible for the structure and another for the contents of your home. Mortgage companies, however, may require that your deductible be under a certain amount. Flood damage to a car is covered by the optional comprehensive portion of an auto insurance policy.

Percentage Deductibles Apply to Earthquakes, Hurricanes and Hail

Earthquakes: Deductibles for earthquake coverage can range anywhere from 2 percent to 20 percent of the replacement value of the structure. Insurers in states like Washington, Nevada and Utah, with higher than average risk of earthquakes, often set minimum deductibles at around 10 percent. In most cases, consumers can get higher deductibles to save money on earthquake premiums.
California residents also can purchase earthquake insurance through the California Earthquake Authority (CEA). The standard CEA policy includes a deductible that is 15 percent of the replacement cost of the home. The basic policy covers only the house (other structures such as garages, pools, etc. are not covered). Personal possessions are covered up to $5,000 and “loss of use” expenses, the additional cost of living elsewhere while repairs are made to the home, are covered up to $1,500. Recognizing that some people want more comprehensive coverage, the CEA also offers a 10 percent deductible for other structures, personal items coverage up to $100,000 and $15,000 in “loss of use” coverage.
Hurricanes and Hail: There are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes; and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity in terms of wind speed. Due to these differences, homeowners should check their policies and speak to their agent or insurance company to learn exactly how their particular hurricane deductible works. In some states, policyholders have the option of paying a higher premium in return for a traditional dollar deductible. However, in high-risk coastal areas insurers may not offer this option, instead making the percentage deductible mandatory.
Hurricane Deductibles Are Not New: The first hurricane deductibles were introduced into policies over 20 years ago. After Hurricane Hugo hit South Carolina in 1989 and Hurricane Andrew hit Florida in 1992, insurers realized they were far more vulnerable to huge weather-related losses than they had previously thought. In order to be able to continue getting reinsurance (basically insurance for insurers), and thus continue to offer homeowners insurance in high-risk areas it became necessary to require policyholders to share some of the cost by including hurricane deductibles in policies.

Consider Percentage Deductibles When Purchasing a Home

When looking for a new home, it is important to consider the cost of insurance. Coastal properties and other locations at higher risk for a natural disastermay cost more to insure than other locations, and you must add to that a separate deductible for earthquake or hurricane damage. Remember, you will be paying for insurance the entire time you live in your home—if you are a prospective buyer and feel you cannot afford the insurance, then it may be time to consider a different home.

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